ASSIGNMENT 2 FRONT SHEET

Qualification BTEC Level 4 HND Diploma in Business

Unit number and title Unit 1: Business and Business Environment

Submission date 1st November, 2021 Date Received 1st submission

Re-submission Date Date Received 2nd submission

Student Name Nguyen Khanh Ly Student ID GBH210685

Class GBH1013 Assessor name Ngo Tran Thai Duong

Student declaration

I certify that the assignment submission is entirely my own work and I fully understand the consequences of plagiarism. I understand that
making a false declaration is a form of malpractice.

Student’s signature Khanh Ly

Grading grid

P4 P5 P6 M3 M4 D2

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1. Introduction:

Vietnam Dairy Products Joint Stock Company (VNM) is believed to have an opportunity to be
a profitable investment. As a business analyst of Vietcombank Fund Management (VCBF), I
would conduct research on the internal as well as the external environment of the company.
The PESTLE model would be applied appropriately to support a detailed analysis of the
macro-environment within an organization. I also use the forces from Porter’s model to
identify the strengths and weaknesses of the financial factors of Vinamilk. Finally, the SWOT
and the SWOT matrix are used to analyze and justify how Vinamilk deals with the impacts that
are opposed by the macro environment. 

2. The Positive and Negative impact the Macro environment has upon Vinamilk:
PESTLE model analysis of the macro-environment within VNM.

2.1 Political
The political factor brings both challenges and opportunities to the Vietnam dairy industry in
general and Vinamilk in particular. As part of the EU – Vietnam Free Trade Agreement (EVFTA),
which officially took effect from August 2020, in the next 3-5 years, Vietnam will reduce import
duties on dairy products from Europe to 3.5%-0% from the current 5%-15% (Vinamilk , 2020). As
the EVFTA is beneficial for imported milk from Europe, the dairy market will be much more
competitive. To be clearer, besides the domestic product, VNM has to share the dairy market
with imported products from Europe.
However, at the same time, this agreement has motivated Vinamilk to actively transform its
export function into the International Sales Department, which will reinforce the firm’s strategy
for market expansion (Anh-Nguyen, 2020).

2.2 Economic
According to World Bank, the Vietnamese economy has been hit by the ongoing COVID-19
pandemic but the GDP still showed growth by 2.9% in 2020 (The World Bank , 2021). Although
considered as a great success of Vietnam as it was in the world’s top highest growth rates in the
context of the pandemic, this figure is the lowest growth rate in the period 2011-2020 which has
hampered the dairy industry’s growth in 2020. Consumer demand was affected as 32.1 million
people nationwide were adversely affected by the pandemic and the average income of

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employees fell by 2.3% (General Statistics Office, 2020). According to Nielsen, the FMCG sector
recorded a 7% decrease in value and a 6% decrease in the dairy industry alone (Vinamilk , 2020).

2.3 Social
The change in the demography of Vietnam has created opportunities for the development of the
dairy industry in this country. The Viet Nam Dairy Association forecasts Viet Nam's dairy industry
will grow from 9-10 percent next year and local milk consumption per capita will reach 28 liters in
2020. The increasing young population and the growing number of middle-class people in urban
areas are considered as the reason for the high demand for high-value dairy products. Many large
enterprises are recorded to increase their market share through developing new products,
included Vinamilk (Vietnam News, 2019). In 2020, knowing the trend of rising income among the
consumers and the increase in the awareness of the health of these people, Vinamilk has
successfully launched 10 new products to satisfy the needs of each customer and raise its market
share (Vinamilk, 2020).

Vinamilk successful new products in 2020

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 Source: cited from VNM’s sustainable development report 2020 (Vinamilk, 2020)

2.4 Technology
Vinamilk invested heavily in modern technology for dairy farming as well as the operational
process of the organization. By understanding the importance of technology in growing the
company, Vinamilk received a lot of positive results. For example, the total productive
maintenance – TPM system is constantly improved and applied to assisting factories in improving
production, optimizing all stages in the production process, reducing production and operating
costs, and enhancing staff capacity to attack and eliminate all kinds of losses in the spirit of
continuous improvement (Vinamilk, 2020).

2.5 Legal
The Intellectual Property Law in Vietnam has some issues that adversely affect the protection and
recognition of Vinamilk’s trademark. Dr. Nguyen Nhu Quynh, Deputy Chief Inspector of the
Ministry of Science and Technology, shared that the protection and enforcement of intellectual
property rights for well-known trademarks are the needs, interests, and desires of large
enterprises at the seminar “Protecting famous brands, practical needs of enterprises, and
solutions” held in Ho Chi Minh City on June 16, 2019. Vinamilk is a leading brand of dairy products
in Vietnam, but due to some problems of the Intellectual Property Law, this firm so far has not
been recognized as a well-known trademark even though it meets all the necessary conditions
(AGL's admin , 2019).

2.6 Environmental
The sustainable development trend in the world in recent years brings many positive results for
Vinamilk – one of the leading enterprises that focus on sustainable development through
environmental protection. Understanding the importance of environmental factors, VNM
received a myriad of economic opportunities. Social marketing and more social objectives that
are helpful for the corporate reputation, the market niche by developing green products and
processes, and finally, managing current and future risks that come from regulatory of state to
protect the environment.

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 Vinamilk’s results in efforts to protect the environment in 2020

Source: cited from VNM’s sustainable development report 2020 (Vinamilk, 2020)

3. The Strengths and Weaknesses of Vinamilk:

3.1 Internal analysis: Financial Factors

Strengths:
According to Nielsen Vietnam, Vinamilk is wholly warranted as the leading company in dairy
products in Vietnam for many years (Vietnam News, 2021). According to Vinamilk’s annual report
(Vinamilk , 2020):

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 The Total Capital: VND48.432 billion (Vinamilk , 2020)
The Total Revenue: VND59.723 billion (Vinamilk , 2020)
The Market Capitalization: VND229.443 billion (Vinamilk , 2020)

Highlights of VNM in 2020

Source: cited from VNM’s annual report 2020 (Vinamilk , 2020)

The total assets of VNM from Quarter 3-2020 to Quarter 2-2021

Source: cited from Financial Statement of VNM (CafeF, 2021)

All these numbers prove Vinamilk’s financial strength (just have approximately about 37% of the
debt), and affirm its position compared to other rival companies.
In addition, Vinamilk continuously strictly manages its financial situation. For example, from
2010-2014, Vinamilk had no debt, the profit margin was always above 30%, cash flow constantly
showed positive numbers (Maneki-marketing, 2020).
Weaknesses:
Although being the most valuable dairy brand in Vietnam, Vinamilk’s revenue is still affected by
too many factors.
For example, Vietnam is in a period of rapid urbanization with an annual growth rate of 2.95%.
Currently, about 33.6% of the population lives in urban areas. While the proportion of urban
residents has increased in recent years, it is still far below 54% of the world average. In terms of

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 income, Vietnamese people are still mainly in the lower-middle class. So if there is a case where
the economy grows slowly, the demand of dairy products (which is not the main source of
nutrition in Vietnam) will sharply decrease (Maneki-marketing, 2020).
Moreover, since VNM imported many raw materials from abroad, the low domestic dairy
productivity and high price of raw milk in the world also affected the profit of the company. In the
worst-case scenario, Vinamilk could be adversely affected by the global economics crisis, causing
the price of raw materials to increase, and at the same time is affected by the high inflation rate
in Vietnam, which cause the profit margin to decrease (Maneki-marketing, 2020).

3.2 External analysis:

Current competition: The Brand name of Vinamilk

The dairy industry is an oligopoly market. According to Euromonitor’s statistics, there are currently
more than 10 businesses participating in the game for liquid milk market share, including Vinamilk,
Quang Ngai Sugar, Ba Vi Milk, Moc Chau Milk, etc. However, Vinamilk and FrieslandCampina Vietnam
spend most of the playing fields, other businesses only occupy a small corner next to the two giants.
In 2012, these two giants accounted for nearly 66% market share of the whole industry (Brands
Vietnam , 2013).

The Strength of Vinamilk in the Competition

According to Euromonitor, Vietnamese consumers tend to choose dairy products based on long-
standing brands, rarely buying private brands (Brands Vietnam , 2013). For this reason, Vinamilk,
which is established in 1976, has the biggest strength in this competition. At the end of 2020,
Vietnam held the largest market share in the dairy industry with 43.3%, followed by the competitor
– FrieslandCampina with only 15.8% (Vitic, 2021).

4. How Strengths and Weaknesses interrelate with external factors:

4.1. SO: Vinamilk uses its strength to take advantage of opportunities

Having a rapid supply chain and a strong distribution network is Vinamik’s strength. In 2019, the
company has used this potency to take advantage of China’s growing demand for dairy products to
increase its market share.

Vinamilk owns 12 farms with 30.000 cows, 6.600 contracted farmers with 100,000 cows, and a new
dairy farm complex in Xiengkhouang province (Laos) to supply raw fresh milk. Moreover, imported

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milk powder from the USA, Europe, and Oceania is also proof of the prompt supply chain of this
company (Vinamilk , 2020).

According to the Chinese Ministry of Agriculture, in the Chinese market, the domestic milk supply is
currently only producing enough to meet 75% of demand. China is expected to import 39.43 million
tons of milk and milk products in 2019 (Vietnam Credit, 2020).

Understanding this opportunity, with the strength of the supply chain, Vinamilk representing
Vietnam’s dairy industry participated in the “Vietnam Dairy Product Launching Program in China”.
This event helps Vinamilk yogurt to hit Hema smart supermarket shelf in China (Vietnam Credit,
2020).

4.2. ST: Vinamilk uses its strength to avoid the threat

Vinamilk has the strength of a reliable long-lasting brand among consumers. With the rapid
development of the dairy industry, this sustainable brand name is considered as a bright spot for
Vinamilk to avoid threats from competitors of domestic as well as the international dairy market.

On August 20th, 1976, Vinamilk was established on the merger of three Vietnamese dairy companies
at that time, Dielac, Truong Tho, and Thong Nhat. During 50 years of development, Vinamilk has
become a familiar brand with a wide range of product lines, quality, and received reliability from
domestic customers (Vinamilk , 2021).

However, through time, this brand is also facing more and more different competitors from the
domestic as well as international dairy market (Maneki-marketing, 2020). In the domestic market, TH
True Milk is the biggest rival company of Vinamilk. Since its establishment, TH True Milk has set a
goal to account for 50% of the local consumption by 2017. This organization has invested $1.2 billion
as well as a myriad of human resources to build the largest dairy farm in Asia and the largest dairy
factory in Southeast Asia (Vy-Thao, 2015).

According to Euromonitor, Vietnamese consumers tend to choose dairy products based on long-
standing brands, rarely buying private brands (Brands Vietnam , 2013). Taking advantage of this
consumption habit of customers, Vinamilk constantly promotes its brand, emphasizing its longevity
and reliability to avoid threats from the competitors.

4.3. WO: Vinamilk takes advantage of the opportunity by overcoming weaknesses

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The supply of raw materials is being supported by the Government, imported materials have a
reduced tax rate is an opportunity for VNM improves the weaknesses of relying too much on
imported materials.

Ms. Mai Kieu Lien – General Director of Vinamilk said that 80% of milk materials produced in the
country (including powdered milk and liquid milk) are from imported sources (Hai-Dang, 2006).
Dependence on imported raw materials is Vinamilk’s weakness.

The Government has created an opportunity for Vietnamese dairy enterprises in order to promote
the development of the domestic dairy market, strengthening price completion with imported goods.
According to the schedule of commitments with WTO, Vietnam will only cut import tax on finished
milk products by 5% within the five years, the remaining tax rate is still quite high at 25%. Particularly
for powdered milk materials, import tax will be reduced in the next two years to 18% (Hai-Dang,
2006).

Vinamilk has taken this opportunity to improve the weakness of depending on imported materials
which causes input costs to increase and product prices also increase.

4.4. WT: Vinamilk minimizes its weaknesses and avoid threats

Although being the leading company of dairy products, Vinamilk’s powdered milk market share is
one of the company’s weaknesses. With the competition from foreign milk brands, imported from
the UK, USA, Netherlands, etc along with increasingly strict demands from consumers, Vinamilk no
longer holds a monopoly position in the dairy market (Khanh-Khiem, 2020).

Although Vinamilk is leading the powdered milk segment, it has faced many difficulties due to smaller
competitors namely, NutiFood, Dutch Lady, and TH True Milk launching new products. Specifically,
thanks to unique products, combined with the average price 10-15% lower than competitors,
NutiFood and VitaDairy are gradually gaining a good market share in the powdered milk market
(Investment Bridge , 2019).

However, in powdered milk sectors, Vinamilk is performing comprehensive growth and remaining a
market leader for many years (NhanDan News, 2021). Vinamilk has invested in building Vietnam Milk
Powder Factory to minimize this weakness, which is equipped with the Asia’s leading modern milk
powder production line with state-of-the-art production technology. The factory operates with
completely closed process, 100% automatic from processing, canning, packing, ensures absolute

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safety and food hygiene for consumers (Vinamilk , 2021). Moreover, in 2020, Vinamilk has launched
a breakthrough product – Baby milk powder with added bird’s nest to back to the milk powder race.
In recent years, Vinamilk has carried out many strategic cooperation programs with leading nutrition
corporations in the world such as Chris Hansen, Dupont, DSM, etc to launch many new powder
products namely: The first European Standard Organic Gold Powder produced in Vietnam or Yoko
milk powder with GOS fiber.

5. The impacts that Macro factors have upon Vinamilk objectives and decision-making:

The EU – Vietnam Free Trade Agreement (EVFTA) has created opportunities that makes Vinamilk
issues a various business decisions and changes objectives.

Vinamilk established a new International Business Division.

The Board of Directors of Vietnam Dairy Products Company (Vinamilk) has issued Resolution No.
20/NQ-CTS.HDQT/2018, according to which, Vinamilk decided to establish a new International
Business Division from December 1st, 2018, and the current Business Division changed its name to
Domestic Business Division. Vinamilk said this move is to strengthen its strategy of expanding
investment abroad (Thanh-Long, 2018). Participating in the Gulfood Dubai International Fair 2020,
taking place from February 16th to 20th, 2020 in Dubai, VNM signed a contract to export milk that
worth up to 20 million USD (Reporter, 2020).

These actions can be explained because Vinamilk has anticipated that the situation in the domestic
market will be difficult, especially after the EVFTA comes into effect. Vinamilk CEO Mai Kieu Lien said
that Vinamilk will focus more on expanding into other markets: “If we do well, our prices are
reasonable, the growth will be spectacular in the international market.” (Quoc-Anh, 2020).

Vinamilk constantly launching high-end products with reasonable prices to compete with imported
milk from Europe.

Vinamilk has been preparing for many years to adapt to the opening of the domestic market to
imported products. The company has made strategic steps in technology investment, cooperation and
continuously launched new products that suitable to Vietnamese consumers’ tastes (Ngoc-Thuy,
2020). Mr.Trinh Quoc Dung – Executive Director of Material Area Development, Vinamilk said: The
foreign market is important but “the domestic market is decisive”. Each business has its own
characteristics, so it is necessary to create special products (Quoc-Anh, 2020).

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 Vinamilk currently imports about 10% of raw materials from Europe, including skimmed milk powder
and non-skimmed milk powder. The import tax on these products before EVFTA is 5%, from August
1st, 2020, it will be reduced to 2.2% and gradually reduced to 0% after 2022. Thus, the reduced tax
rate will help Vinamilk increase the competitiveness of dairy products in terms of price (Ngoc-Thuy,
2020).

Furthermore, Vinamilk already has organic fresh milk, or actively imports fresh milk products from
Europe, through its subsidiary in Poland (Ngoc-Thuy, 2020).

6. Conclusion

Being the leader of the dairy industry in Vietnam, Vinamilk has understanded deeply the strengths as
well as the weaknesses of itself. The PESTLE models analyzed both positive and negative impacts of
macro environment have upon the Vinamilk. The SWOT analysis has illustrated the strengths and
weaknesses and how they interrelate with external factors. Thanks to this analysis, we could
understand how Vinamilk deals with external opportunities/threats and how opportunities/threat
that are opposed by macro environment makes the company issues a various business decisions and
changes objectives.

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